Helping MFIs Overcome Disasters: Lessons and Strategies for Donors and Donor-funded Projects
This report summarizes lessons that can be learned from experiences of local MFIs, the U.S. Agency for International Development (USAID)/El Salvador-financed Rural Financial Markets Activity (FOMIR), and USAID/El Salvador in response to the Salvadoran earthquakes of 2001.
The earthquakes that struck El Salvador in January and February 2001 caused widespread damage, affected MFI clients and posed a threat to MFI financial stability. Lessons from the crisis include:
- Clients need assistance tailored to their individual needs rather than a blanket response to the situation;
- Good clients before the crisis were especially likely to be good clients during the crisis;
- Clients who received benefits such as emergency supplies tended to have better repayment records after the earthquakes than clients who had not received such benefits;
- Remittances increased in the months following the earthquakes, and helped families rebuild, maintain consumption levels and service their loans.
The report recommends that MFIs should maintain client discipline before a disaster, keep a current database of clients, appraise the situation and respond quickly to changing circumstances during the crisis. Donors should understand the nature and magnitude of the crisis before constructing a response that strengthens MFIs’ underlying business principles.
